Markets rallied in response to the Fed's plan to boost the economy, report Neil Irwin and Lori Montgomery: "The Dow Jones industrial average was up nearly 2 percent, erasing the last of the breathtaking losses that followed the failure of the investment bank Lehman Brothers. ...The Fed's action in effect grants Congress carte blanche to cut taxes or raise spending significantly without worrying about the impact of higher budget deficits on the economy. Deficit spending requires the government to borrow heavily, which in turn puts pressure on a broad range of interest rates. The central bank's bond purchases are designed specifically to lower interest rates, giving lawmakers the leeway they would need for fiscal stimulus."

Senate Minority Leader Mitch McConnell conceded that health-care reform repeal is impossible this Congress, reports Scott Wong: "'We may not be able to bring about straight repeal in the next two years, and we may not win every vote against targeted provisions, even though we should have bipartisan support for some,' McConnell said during a Thursday speech at the Heritage Foundation. 'But we can compel administration officials to attempt to defend this indefensible health spending bill and other costly, government-driven measures, like the stimulus and financial reform.'"

Obama will host negotiations with congressional Republicans on extending the Bush tax cuts, report Anne Kornblut and Perry Bacon: "The Nov. 18 meeting will focus on economic concerns, particularly the tax cuts passed in 2001 and 2003 that are due to expire at year's end, as well as on nuclear nonproliferation, Obama told reporters at the end of a Cabinet meeting Thursday. ... At the same time, party leaders acknowledged that voters had not handed the GOP a mandate for its ideas Tuesday and that Obama would serve as a check on the Republicans' power. 'By their own admission, leaders of the Republican Revolution of 1994 think their greatest mistake was overlooking the power of the veto,' McConnell said."

Still to come: Emerging economies oppose the Fed's plan; Obama will press forward with regulation to combat climate change; Pelosi is considering a run for House minority leader; and Voldemort and his Death Eaters descend on Grand Central Station.

Economy/FinReg

Emerging economies are critical of the Fed's plan, reports Howard Schneider: "In developing markets, however, there are concerns that the move could aggravate some of the same problems in the global economy that U.S. officials say they are trying to curb. U.S. officials have roundly criticized China's undervalued currency and large trade surplus, saying these make it hard for other nations to export more. But loose U.S. monetary policy, which has left the economy awash in dollars, is seen as the other side of the coin. Among Jakarta's business community, 'sentiment is against' any move by the Fed to add more money to the system, said Sandiago Uno, founding partner of Saratoga Capital, a local investment firm."

Rescuing Fannie and Freddie could cost almost $700 billion, reports Nick Timiraos: "The total cost to rescue and then overhaul mortgage giants Fannie Mae and Freddie Mac could reach $685 billion, according to estimates published Thursday by Standard & Poor's. Fannie and Freddie have already cost taxpayers nearly $134 billion, but S&P analysts said Thursday that the government could ultimately be forced to inject $280 billion into the firms because of a slowdown in the housing market. ... Analysts estimate that it would cost an additional $400 billion to sufficiently capitalize any entities that would take the place of Fannie and Freddie."

Republicans will effectively shut down government if they do not approve a higher debt ceiling, Bruce Bartlett tells Derek Thompson: "We can only pay with bills that come in -- payroll taxes, income withholding, that kind of thing. But that's not enough money. Let's say the Treasury makes $100 of cash today but it has to pay $1000 of bills. You have to create a line. We don't want to piss off investors, so they come first. If bond holders come first, maybe Social Security recipients come second, but eventually you run out of money. Somebody has to go to the back of the line. Somebody expecting payment won't get paid when he's expecting a payment. It's a terrible thing. That's why the debt ceiling has always been raised."

Obama is not struggling because of a lack of focus on the economy, writes Paul Krugman: "After all, are people who say that Mr. Obama should have focused on the economy saying that he should have pursued a bigger stimulus package? Are they saying that he should have taken a tougher line with the banks? If not, what are they saying? That he should have walked around with furrowed brow muttering, 'I’m focused, I’m focused'? Mr. Obama’s problem wasn’t lack of focus; it was lack of audacity. At the start of his administration he settled for an economic plan that was far too weak. He compounded this original sin both by pretending that everything was on track and by adopting the rhetoric of his enemies."

Voters did not leave Congress with a clear mandate for certain policies, writes Steven Pearlstein: "Thanks in part to the efforts of the tea party, voters' top priority was deficit reduction. Fair enough. But it's a little hard to square that priority with the next two on the voters' to-do list: creating jobs and cutting taxes. Under most realistic scenarios, taking care of those would almost surely increase the deficit. Only in conservative fantasies do tax cuts from today's levels magically increase government revenue. And if short-run job creation is your concern, the economic textbooks prescribe more government spending, not less. The job of political leaders is to find a way to reconcile these conflicting priorities while explaining to voters the necessary and unpleasant trade-offs."

Obama insists he'll move forward with climate regulations, report Juliet Eilperin and Steven Mufson: "Obama said he thought it might be possible to reach bipartisan agreement on broadening nuclear power use, natural gas exploitation and sales of electric cars. He said the cap-and-trade approach to limiting the emissions of greenhouse gases 'was just one way of skinning the cat; it was not the only way. It was a means, not an end.' Obama also hinted that the accord the administration forged with the auto industry, unions and investors that raised fuel-efficiency standards for cars and trucks could be a model for a deal with electric utilities over carbon dioxide emissions at power plants."

EPA policy chief Lisa Heinzerling is resigning, reports Robin Bravender: "There are two camps within the agency on climate, said an environmental advocate who spoke on background. The Heinzerling camp, with the mind-set that, 'we have the law on our side; let’s go get them.' In the other camp are Administrator Lisa Jackson and EPA air chief Gina McCarthy, who are trying to maintain the support of the White House and Congress. ... 'I think she’s probably the farthest left and most committed of anyone on the team, with the exception of Carol Browner,' on climate change, said an industry attorney familiar with the agency, referring to the former agency administrator and President Barack Obama’s energy and climate adviser."

Incoming House Transportation Committee chair John Mica backs high-speed rail, reports John Collins Rudolf: "'I am a strong advocate of high-speed rail, but it has to be where it makes sense,' Mr. Mica told The Associated Press in a post-election interview. 'The administration squandered the money, giving it to dozens and dozens of projects that were marginal at best to spend on slow-speed trains to nowhere.' Mr. Mica said he would like to redirect the rail money to the Northeast corridor, which he described as possibly the only place in the country with enough population density to financially support high-speed train service."

Nancy Pelosi is considering a run for House minority leader, reports Russell Berman: "Pelosi (D-Calif.) launched a round of speculation about her future when she told ABC News on Wednesday that she would canvass the House Democratic caucus before deciding what to do. The interview led senior Democratic aides to believe she was seriously contemplating a bid. Other Democrats, including Majority Leader Steny Hoyer (Md.), have remained silent about their plans while the party waits for a decision from Pelosi. Hoyer has vowed he would never again run against Pelosi."

New GOP governors are threatening to disrupt health-care reform's implementation, reports Janet Adamy: "Wisconsin's Republican governor-elect, Scott Walker, met with lawmakers Wednesday to discuss how to minimize the state's participation in the law's expansion of Medicaid, the federal-state insurance program for the poor. He also wants to lean on private entities to run the insurance exchanges, where lower earners who qualify for tax credits and small businesses will shop for insurance starting in 2014. ... Mr. Walker, along with new GOP governors in Wyoming and Oklahoma, said they planned to join in the legal fights against the law's requirement that most Americans carry insurance or pay a fine."

House Republicans say they'll work on online privacy legislation, reports Cecilia Kang: "Rep. Joe L. Barton (Tex.), ranking GOP member of the House Energy and Commerce Committee, signaled the legislative push in a statement about his correspondence with Facebook executives on privacy issues...Such an effort on privacy would mark an exception to the otherwise hands-off approach that the incoming GOP majority is widely expected to take toward issues affecting the high-tech and telecom industries, including regulation of broadband networks."

The federal government needs a COO, write Bob Kerrey, Mark L. Alderman and Howard Schweitzer: "The country's chief executive officer needs a chief operating officer to run the day-to-day government, to cut through budget battles, political fiefdoms, parochialism and inertia to assist the president in keeping this country moving. Let the president's chief of staff manage the White House -- an enormous responsibility in itself. We need a chief operating officer to manage everything else. While a COO must understand how policy and politics influence decision making in Washington, he should leave the politics to the chief of staff and others in the White House and undertake the hard role of running the business of government."

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

To the best of my knowledge, 48 states have applied for grants from HHS to plan for an insurance exchange. Minnesota and Alaska are the laggards, the former because of its governor's short-sighted politicking about health reform and the latter for reasons unknown. In other words, even the red states are interested. States have a significant financial incentive to take the Federal matching Medicaid funds and set up exchanges so their uninsured can receive subsidies. They'll be able to get insured and they'll be able to see the doctor, which will essentially be stimulus spending. For better or worse, states can set their exchanges up to be somewhat less regulated than some (like me) would like as well.

At the end of the day, I think we can afford for some of the red states to implement this in a less consumer friendly fashion. Uninsured people in those states will likely get poorer insurance than they would otherwise. We really have to get costs under control in the long run. The ACA provides us many of the mechanisms we need to and we absolutely can't afford to lose those. We will probably need to do more on cost control, as Ezra has said before.

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